How green is your bank? New research says banks still fund fossil fuel projects
Even with multi-trillion-dollar pledges to move world finances toward net zero at the past week’s COP26 sessions, renewed scrutiny is being directed toward banks that fund new oil and gas infrastructure.
At this year’s COP26 conference, governments and NGOs are looking at how financial institutions can ramp down investment in fossil fuels, with an eye on net zero.
One area that’s come under increased scrutiny: banks lending to big-ticket oil and gas infrastructure like pipelines, mines, and LNG terminals – something finance watchdog Banktrack is highlighting.
The Netherlands-based NGO’s report, released in the week prior to COP26 found numerous major Canadian banks funded emissions-heavy climate projects like coal mines, pipelines, or LNG terminals since 2016, soon after the Paris Agreement was signed. By Banktrack’s count, the Royal Bank of Canada has funded 11, Scotiabank 6, Bank of Montreal and CIBC 4 each, Manulife 3, and TD Bank 1.
“We cannot stay within the 1.5-degree target if these banks continue to finance new fossil fuels,” the report’s lead author, Hannah Greep, told The Weather Network.
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Banktrack’s report measures the banks’ lending against the Equator Principles, a banking sector pact first established in 2003 and updated periodically since. Its main function is as a framework for signatories — currently 126 lending institutions in 38 countries — to determine, manage, and report on individual environmental and social risks of projects they finance.
They were updated after the 2015 Paris Climate Agreement to say that signatories supported the agreement, and “recognise that [we] have a role to play in improving the availability of climate-related information.”
Greep said her report takes into account the fact the Equator Principles weren’t designed as a tool to tackle climate crises. However, she said that when they were updated in 2018 to include language supportive of the Paris goals, calls by NGOs to include details on how to fulfill the Paris Agreement’s climate goals went unheeded.
“The commitment to the Paris Climate Agreement cannot be used to show that these banks are taking action on climate, when there is no movement to end finance for new fossil fuel projects under the Principles,” Greep said.
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While Equator signatories do pledge to be transparent about a particular project’s expected impact on the environment and society, Greep noted that the pact currently contains no enforcement or accountability mechanisms — something she said would be an important tool for affected communities to raise concerns about a project’s local effects.
For example, Banktrack’s report included a review of the under-construction Coastal Gaslink pipeline that will run between Dawson Creek and Kitimat in British Columbia. Banktrack noted that project does comply with several climate-related requirements of the Equator Principles, but “there still remains a lack of information on the climate change risks of the project.”
Several of the project’s financiers also did not disclose lending on the Coastal Gaslink project, including Canadian banks TD and Export Development Canada.
When asked to account for the lack of disclosure, TD spokesperson Thomas Chanzy told The Weather Network that, “there are a number of disclosure conditions and TD disclosed data of its [Equator Principles] projects as required." Chanzy also said the bank’s climate action plan includes a target to achieve net zero by 2050.
Non-disclosure of lending doesn’t necessarily mean negligent behaviour on the part of the banks: Greep explained that the Equator Principles currently allow several exemptions for lenders, particularly when clients don’t consent to report — something Greep says is often cited as a barrier by banks to reporting.
“This is clearly a problem which needs to be addressed, and we have called upon the [Equator Principles Association] and banks to require client consent for project name reporting at the outset of any financial relationship, therefore avoiding the situation...of patchy name reporting,” she said.
If the long-term goal is to edge banks out of lending to oil and gas projects, some developments on this past Wednesday’s Finance Day at COP26 should give advocates some hope.
The biggest headline was a pledge by more than 450 banks and pension funds in 45 countries to limit greenhouse gas emissions in their investments, while separately, 20 countries announced they would halt lending to new fossil fuel projects.
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